Schaeffler : Commented slides presentation Q4 and FY 2023 Schaeffler AG earnings

Company Representatives

Klaus Rosenfeld, CEO

Claus Bauer, CFO

Renata Casaro, Head of Investor Relations

Conference Call (Active) Participants

Akshat Kacker, JP Morgan

Horst Schneider, Bank of America

Marc-René Tonn, M.M. Warburg

Michael Raab, Kepler Cheuvreux

Stephanie Vincent, Bank of America

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Renata Casaro

Dear investors, dear analysts, good morning. Today, for the full year 2023 release of the Schaeffler Group, Mr Klaus Rosenfeld, CEO of Schaeffler Group, Mr Claus Bauer, CFO, and us from the IR team are here to take you through the results and guidance for 2024. This conversation will be conducted as usual, under the disclaimers you find on the deck. And without further ado, let's start the call. Klaus, the floor is yours.

Klaus Rosenfeld

Thank you, Renata. Ladies and gentlemen, welcome to our annual results call today, on March 5th. We will share the call, as usual, between Claus Bauer and myself. I will start with the overview and some information on the business development. Let's go to page number four first.

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Klaus Rosenfeld

I think you saw the key figures, sales up 5.8%, what we think is a good result in a challenging environment, particularly driven by positive volume and pricing margin, 7.3%.

The main drivers here were the two Automotive divisions, in particular Automotive Aftermarket with a stellar margin of more than 16%, Free cash flow, €421 mn for the full year, and I think we are proud to say that we overachieved our Guidance, and could even demonstrate strong cash flow generation, despite a Capex number that is 19% above previous year. Dividend, we have already announced, 45 euro cents, the same number as last year.

And you know that we increased the dividend payout ratio going forward from 30% to 50%, to 40% to 60%. Guidance achieved, yes, and you saw this, Industrial at the lower end, we'll come back to this. And for sure, as we indicated to you, the year 2024 is a year of transition. We will only provide you with Guidance on Group level. Claus is going to explain that, that's a little bit of a complicated Guidance, as required by the rules.

And for sure, the divisional part that we are not guiding for will be part of the explanations during the year, who is achieving what. But with all the structural

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changes that are in front of us, as a result of the Vitesco merger, we think it's prudent not to go too much into detail, but rather, focus on the year 2025 and beyond.

The last point, the deal execution is on track. We are five months, more or less, down the road, with a rapid execution pass, more or less, every two weeks, something new. The latest information was the exchange ratio with 1:11.4, or to say it in numbers of shares that you can count, 5 to 57 shares for Vitesco and Schaeffler. The AGM is in April, as you know, and we still expect closing in the fourth quarter.

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Let me go to page five, the famous CEO page, with the highlights and the lowlights. Let me start with the lowlights, and that's clearly the top line in Automotive. We have not achieved our outperformance target. The reasons are not new, they were explained during the last quarterly calls. We see this as a temporary situation, where we are lagging global vehicle production. And the second point, also to mention here, Industrial, also something that we have debated in all the quarterly calls of the past. The Industrial top line is, and has been, under pressure, due to the overall weaker economic environment. You all know Industrial is a cyclical business, and as the chart later shows, it looks like that we have reached the trough, and that the situation will hopefully turn soon. Today is the Congress in China, let's see what that brings. And we'll see that also here, in Europe, and in the other markets, things develop to the better.

On the positive side. I think Group performance is on the positive. Strong portfolio management paid off. 7.2% margin speaks for itself. A strong Balance sheet, the transformation is ongoing, even without the Vitesco merger. And we have shown that we can, more or less, self-finance our way forward. Cash generation strong, good profitability, but in particular, effective working capital management led to the strong Free cash flow.

And that's the basis, as you know, for an attractive dividend payout. And for sure, on the strategic side, the merger with Vitesco looks very promising. You all know the good reasons behind this, a strong strategic logic, very well financed. Clearly, something that has significant synergy potential. And then the one share, one vote

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simplification of the shareholder structure should all make it an attractive proposition going forward.

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Numbers on page seven, I'm not going to go into detail here. You see, for the Group, 5.8%, and a margin of 7.3%. If you see the growth of the EBIT before special items, you see that EBIT grew by 13%. That indicates that we are finally, in the year 2023, improving our operating performance stronger than the top line.

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